Legal and Institutional Reform Strategy and Implementation: A World Bank Perspective

By Webb, Douglas | Law and Policy in International Business, Summer 1999 | Go to article overview
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Legal and Institutional Reform Strategy and Implementation: A World Bank Perspective


Webb, Douglas, Law and Policy in International Business


The World Bank (the Bank) has supported legal reform in countries in all the major regions of the World--in countries with civil law, common law and Islamic law traditions, and in countries as disparate as China, the Comoros and the Czech Republic. The Bank has been in the business of supporting legal reform for nearly a decade, so it could be assumed that we have learned a great deal about the strategy and implementation of reform programs in that time.

It is interesting to reflect on the change that has resulted in the importance attached today to law and legal reform in the development process. In the early years of the Bank's existence, lawyers and legal change were seen as rather remote from the Bank's development objectives. In a 1962 letter written on the role of lawyers in the appraisal of Bank-financed projects, the Bank's Office of Information said:

   We have never had a lawyer included on a mission because of his legal
   knowledge. You have probably noticed from the reports [of the various
   missions] that the effort of a mission is generally directed towards broad
   economic planning and programming and that consequently its depth is
   extremely limited in the more specialized and highly technical areas such
   as the development of the legal system of the country or the legal problems
   incident to economic development. This is not to say that men with legal
   backgrounds are never mission members, but rather that, if they have such
   background, it is only incidental to their other abilities.

Fortunately, things have changed. Today, it is widely acknowledged that governments must provide the institutional infrastructure that makes competitive markets work, and that the legal system is a key element of that institutional infrastructure. For example, in a recent report by the African Governors of the Bank, the Governors recognized that capacity inadequacies in the legal system as a whole pose major constraints to the development of capacity in the private sector. They proposed that:

   A high priority should be given to a thorough reform of the legal system,
   including enhancing the local capacity to draft laws, providing support for
   the redrafting of legal codes, improving the judiciary, the capacity of
   State attorneys and private lawyers, and the capacity of legal and judicial
   training institutions.

They went on to say that:

   It is clear that "piecemeal" reform of the legal system often does not
   yield the desired result. When an entire legal system has broken down, it
   is not enough to reform only a limited area of the law, such as banking
   laws, for example, without confronting the weaknesses in law enforcement in
   general. Modern banking laws are of little use when the lawyers, courts,
   and other legal institutions responsible for implementing them lack the
   capacity to do so effectively. What is required is a broader strategy of
   reform which addresses the legal system as a whole.

The African Governors' report is typical as a recognition that there are linkages between economic development and the legal system, even though the precise nature of that linkage is still debated. As an institution with the mandate of promoting economic development, the Bank has been willing to make loans directly to finance comprehensive legal change. In some instances, the legal reform program is a component of a much larger operation, typically covering a range of private or public sector development activities.

With increasing frequency, legal and judicial reform loans are being developed as free-standing operations without a project linkage to other reforms. Such free-standing legal and judicial reform loans have been approved and are now under implementation in Europe, the Middle East, Africa, Asia and Latin America--at last count, 12 loans totaling $260 million. A similar number of new operations are in various stages of preparation.

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